Lodestar Does Not Control Fee Award Against J.C. Penney

The Dallas Court of Appeals has affirmed a trial court’s award of $3.1 million in attorney fees following the settlement of a shareholder derivative suit against J.C. Penney. The settlement required J.C. Penney to stop guaranteeing the unvested incentive equity awards of certain officers, which the plaintiffs’ evidence showed to be worth $62 million over the four years covered by the settlement. The settlement agreement permitted the plaintiffs to apply for a fee award to “compensate Plaintiff’s Counsel for the results achieved in the Action and the risks of undertaking the prosecution of the Action on a contingent basis.” Although plaintiffs’ evidence showed that the lodestar fee for the case would have been $558,123.50, the Court held that the specific language of the parties’ agreement justified a departure from the lodestar. The Court further held that the $3.1 million award was reasonable because it represented 5% of the monetary value of the settlement, citing a number of shareholder derivative cases that also approved fee awards based on a percentage of the settlement value.

J.C. Penney Co., Inc. v. Ozenne, No. 05-13-01601-CV